On August 26, 1982, Associates filed an answer. On October 15, 1982, plaintiffs moved for summary judgment and both defendants moved to dismiss the complaint.
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Troy Towers Tenants Association also moved for permission to intervene as a defendant. Finding the matter not ripe for adjudication because HUD's review of the conversion proposal was still in the early stages, the court denied plaintiffs' motion, took defendants' motions under advisement, and adjourned the hearing of the Tenants Association's motion. On October 21, 1982, plaintiffs filed a notice of motion for rehearing of their summary judgment motion. This motion, which has not yet been formally ruled upon, is ruled upon at this time and is denied. The order entered on this opinion shall so provide.

On June 2, 1983, HUD granted preliminary approval for the transfer of assets from Associates to Hudson Troy Towers Apartment Corp., subject to two conditions. Amended Complaint para. 19. Since final approval will issue on compliance with those conditions and the issues involved are purely legal, the matter is now ripe for decision. See Southeastern Pennsylvania Transportation Authority v. ICC, 644 F.2d 253, 260-62 (3d Cir.1981); Exxon Corp. v. FTC, 588 F.2d 895, 903 (3d Cir.1978).

I. BACKGROUND

The overall aim of the National Housing Act is to stimulate housing production and community development, so as to remedy the housing shortage and realize as soon as possible the "national goal . . . of 'a decent home and a suitable living environment for every American family.'" 12 U.S.C. § 1701t (quoting Housing Act of 1949, § 2, 42 U.S.C. § 1441). In order to achieve these ends, Congress declared, "there should be the fullest practicable utilization of the resources and capabilities of private enterprise" and individual self-help. 12 U.S.C. § 1701t. Cf. Housing Act of 1949, § 2, 42 U.S.C. § 1441 (policy of Housing Act of 1949 is to encourage private enterprise "to serve as large a part of the total need as it can"); Department of Housing and Urban Development Act of 1965, §§ 2, 3(a), 42 U.S.C. §§ 3531 (HUD to "encourage the maximum contributions that may be made by vigorous private home-building and mortgage lending institutions to housing, urban development, and the national economy"), 3532(b) (Secretary of HUD to do the same). Congress particularly wished to encourage production of low- and moderate-income housing. See e.g., Gramercy Spire Tenants' Ass'n v. Harris, 446 F. Supp. 814, 825 (S.D.N.Y.1977) (citing cases).

any other mortgagor approved by the Secretary which, until the termination of all obligations of the Secretary under the insurance . . ., is regulated or restricted by the Secretary as to rents or sales, charges, capital structure, rate of return, and methods of operation to such extent and in such manner as to provide reasonable rentals to tenants and a reasonable return on the investment.

The insurance of mortgages under this section is intended to facilitate particularly the production of rental accommodations, at reasonable rents, of design and size suitable for family living. The Secretary is, therefore, authorized and directed in the administration of this section to take action, by regulation or otherwise, which will direct the benefits of mortgage insurance hereunder primarily to those projects which make adequate provisions for families with children, and in which every effort has been made to achieve moderate rental charges.

Id. § 1713(b). The statute also defines "rental housing":

The term . . . means housing, the occupancy of which is permitted by the owner thereof in consideration of the payment of agreed charges, whether or not, by the terms of the agreement, such payment over a period of time will entitle the occupant to the ownership of the premises . . . .

Id. § 1713(a)(6). The statute provides no guidance as to the meaning of "reasonable rents," "moderate rental charges," or "reasonable return on the investment."

Pursuant to § 1713, the Secretary (then Federal Housing Commissioner)
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agreed to insure the mortgage on Troy Towers Apartments and entered into a regulatory agreement with the Apartments' original mortgagor, Troy Village, Section C, Inc., on September 16, 1964. Complaint para. 13 & Ex. C. This agreement provides, inter alia, that the mortgagor will not rent premises for a period of more than three years at a time, will not charge rents in excess of those approved by the Secretary, and will not, without the Secretary's prior written approval, convey the mortgaged property or require, as a condition of occupancy, any consideration other than first month's rent and a month's security. Id., Ex. C, PP 4(a), 6(a), 6(g). If the mortgagor violates any provision of the agreement, the Secretary may declare a default and may foreclose, take possession, or seek judicial relief. Id., Ex. C, P 10. The mortgagor warrants that it will not execute any agreement having provisions contrary to those of the regulatory agreement, and states that the regulatory agreement shall control the rights and obligations set forth therein. Id., Ex. C, P 15. The regulatory agreement is binding on the original mortgagor's successors, heirs and assigns. Id., Ex. C. Although the complaint does not allege that Associates is the successor, heir or assign of the original mortgagor, this conclusion can fairly be drawn from the allegations that Associates owns the Apartments and that the mortgage is still insured by HUD.
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The New Jersey Legislature has also promulgated a comprehensive scheme regulating the conversion of rental units to condominiums or cooperatives, N.J.S.A. 2A:18-61.1 et seq. (West Supp.1983). N.J.S.A. 2A:18-61.1 k provides that a tenant may be removed from his apartment if "the landlord or owner of the building . . . is converting from the rental market to a condominium, cooperative or fee simple ownership." No action for possession may be brought until the act has been complied with. N.J.S.A. 2A:18-61.1 k. The statute provides that the landlord must give tenants 60 days' notice of his intent to convert, must give them an exclusive 90-day option to purchase their units, and must notify them of the option and of their statutory rights. N.J.S.A. 2A:18-61.8. After giving this notice, he may give a notice of eviction; however, three years' prior notice is required before a dispossession action may be instituted and, if there is a lease, the action must also await its expiration. N.J.S.A. 2A:18-61.2 g. A tenant who receives a notice of eviction under N.J.S.A. 2A:18-61.2 g is entitled to receive from the owner "moving compensation of [sic] waiver of payment of 1 month's rent." N.J.S.A. 2A:18-61.10. Within 18 months of receiving the notice of eviction, the tenant may also request that the landlord provide him with "the rental of comparable housing." N.J.S.A. 2A:18-61.11 a, which is defined as housing that is safe, sanitary, "located in an area not less desirable than the area in which the tenant then resides," and "provided with facilities equivalent to that provided by the landlord in the dwelling unit . . . in which the tenant then resides," in regard to apartment size and rent range, inter alia. N.J.S.A. 2A:18-61.7 a. In any proceeding to evict the tenant, the landlord must prove that the tenant was offered comparable housing. N.J.S.A. 2A:18-61.11 a. If the court is not satisfied that the tenant was offered such housing, it may grant up to five stays of one year each; no more than a one-year stay may be granted if the owner waives payment of five months' rent. N.J.S.A. 2A:18-61.11 a, c. Senior citizens and disabled persons are entitled to additional protection. N.J.S.A. 2A:18-61.22 et seq.

On or about August 18, 1981, all tenants of Troy Towers received a three-year notice to quit and demand for possession, terminating their tenancies as of September 10, 1984 (unless a written lease expired after that date), because of the landlord's intent to convert the premises to cooperative ownership. Complaint para. 7 & Ex. B. Plaintiffs, who have not subscribed, state that they face eviction as of September 18, 1984. Id. PP 7, 16.

Plaintiffs do not contest Associates' compliance with either HUD's or New Jersey's cooperative conversion requirements. Rather, they argue that the Secretary cannot, under any circumstances, approve the conversion of rental housing to a cooperative, when the mortgage on the property is insured pursuant to 12 U.S.C. § 1713. They contend that the Secretary's consent to the transfer of assets would violate § 1713 and would deprive them of a constitutionally protected property interest. In addition, they assert that the stock subscription agreements are invalid because they violate the terms of the regulatory agreement.

&nbsp;Defendants raise a number of arguments in favor of dismissing the complaint. Initially, Associates asserts that plaintiffs lack standing to maintain this suit.
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Next, both the Secretary and Associates argue that HUD approval of the proposed transfer would not violate § 1713; in addition, the Secretary contends that plaintiffs have no private right of action under the statute. Both defendants assert that plaintiffs fail to state a claim under either the regulatory agreement or the ...

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